If you're reading this in early 2026, you're probably thinking about your 2025 tax return. Your CPA is asking for documents. You're tracking down forms. And you're hoping for a refund or at least not a big surprise.
But here's what separates high-net-worth individuals who build generational wealth from those who just accumulate assets: they don't think about taxes one year at a time.
Tax planning isn't about minimizing this year's bill. It's about building a decades-long strategy designed to preserve wealth, create optionality, and positions your family for long-term success. And that requires a fundamentally different approach than most people take.
I work with successful professionals, business owners, and families here in Greenville and across the country who've built substantial wealth. And the mistakes I see aren't about missing deductions or filing late. They're about optimizing for the wrong timeframe.
So as you prepare your 2025 taxes, here are six strategic considerations that will matter far more than whether you owe $10,000 or get a $5,000 refund.
1. Stop Chasing Deductions and Start Managing Tax Brackets Over Time
Most people think tax planning means lowering their taxable income as much as possible every year. Max out the 401(k). Take every deduction. Defer, defer, defer.
But if you're a high earner, that strategy can backfire.
Here's why: every dollar you defer into a traditional retirement account today is a dollar you'll pay taxes on later. And "later" might come with a higher price tag than you think.
The hidden cost of deferral:
Let's say you're 50 years old, earning $500,000 a year, and you've been maximizing traditional 401(k) contributions for decades. You've got $3 million in tax-deferred accounts. Feels like a win, right?
Fast forward to age 73. Required Minimum Distributions (RMDs) kick in. You're forced to withdraw around $120,000 annually whether you need it or not. Add that to Social Security, pension income, or other investments, and you could easily be in the same tax bracket or higher than you are today.
Except now you have less control. You can't choose when to take the income. You can't manage the timing. And if tax rates go up between now and then? You're stuck.
The alternative approach:
Instead of maximizing traditional contributions every year, consider balancing pre-tax and Roth contributions based on your long-term income trajectory.
If you're in the 35% or 37% bracket now and expect to be in the 24% or 32% bracket in retirement, deferral makes sense. But if you expect similar income in retirement or if you're concerned about future tax rates, Roth contributions or strategic Roth conversions could be far more valuable.
The Big Beautiful Bill Act made current tax rates permanent, but that doesn't mean they'll stay this way forever. Locking in today's rates through Roth strategies might be one of the smartest moves you make this decade.
Action item: Don't just ask your CPA how to reduce taxes this year. Ask your financial advisor to model your tax situation over the next 20-30 years and identify the optimal contribution strategy.
2. Use Low-Income Years Strategically (Even If You Don't Think You Have Them)
High earners rarely think they have "low-income years." But if you look closely, they're often there and they're incredibly valuable.
Opportunities most people miss:
- The year you retire (especially if you retire mid-year or before RMDs begin)
- A year with a business loss or unexpected expense
- The gap between selling a business and starting something new
- Years where deferred compensation or stock vesting is lower than usual
These are the years when Roth conversions become powerful.
Why conversions matter for high-net-worth families:
A Roth conversion moves money from a traditional IRA to a Roth IRA. You pay taxes on the converted amount now, but that money grows tax-free forever. No RMDs. No taxes on withdrawals. And for estate planning purposes, Roth IRAs are far more valuable to your heirs than traditional IRAs.
If you're in the 35% bracket most years but have a year where you drop to 24% or 28%, converting $100,000 could save you $7,000-$11,000 in lifetime taxes. Do that consistently over a few strategic years, and the savings compound dramatically.
But here's the catch: you need to plan ahead. You can't look back in April and say, "I should've done a conversion last year." Once December 31st passes, the opportunity is gone.
Action item: Review your income projections for 2026 now. If you see a year where income will be lower than usual, work with your advisor to model Roth conversion scenarios before the year ends.
3. Think Beyond Income Taxes - Medicare, Net Investment Income Tax, and the Real Cost of "Optimization"
When high earners think about taxes, they usually think about federal income tax. But that's only part of the picture.
The Medicare premium trap (IRMAA):
Your Modified Adjusted Gross Income (MAGI) from two years ago determines your Medicare Part B and Part D premiums. High earners can pay significantly more due to Income-Related Monthly Adjustment Amounts.
In 2026, if your 2024 MAGI exceeded $206,000 (married filing jointly) or $103,000 (single), you're paying higher premiums. The surcharges range from an extra $70/month to over $400/month per person.
Here's where tax planning intersects with healthcare costs: a large Roth conversion, stock sale, or bonus in 2026 could trigger higher Medicare premiums in 2028. That doesn't mean you shouldn't do it, but you need to factor it into the decision.
Net Investment Income Tax (NIIT):
If your MAGI exceeds $250,000 (married) or $200,000 (single), you pay an additional 3.8% tax on investment income (interest, dividends, capital gains, rental income).
This affects how you structure your portfolio. Holding tax-efficient investments in taxable accounts and less efficient investments (like bonds) in retirement accounts can reduce your annual NIIT exposure.
Action item: Don't just look at your marginal tax rate. Model the full cost of income, including IRMAA and NIIT, before making major financial decisions.
4. The Inherited IRA Time Bomb Most Families Are Ignoring
Here's a planning gap that catches nearly every high-net-worth family off guard: what happens when your children inherit your IRA?
Most people think their kids will inherit the account and take small distributions over their lifetime, minimizing taxes. That's how it used to work. But the rules changed dramatically, and most families haven't adjusted their estate plans accordingly.
The 10-year rule:
Non-spouse beneficiaries (like your adult children) must now fully deplete inherited traditional IRAs within 10 years. No more stretching distributions over decades.
For high-net-worth families, this creates a massive tax problem.
Here's what actually happens:
Your successful 40-year-old child inherits your $2 million IRA. They're at the peak of their earning years, likely in the 35% or 37% tax bracket. Now they're forced to withdraw $200,000 per year for 10 years on top of their regular income.
That $2 million IRA? After federal and state taxes, your child might net $1.2-1.3 million. You spent decades building that account, and nearly 40% disappears to taxes, not because you didn't plan, but because you planned for rules that no longer exist.
The Roth conversion strategy:
This is why Roth conversions during your lifetime have become so valuable. If you convert that $2 million traditional IRA to a Roth IRA over 10-15 years while you're in retirement (and potentially in a lower bracket), you pay the taxes. Your kids inherit a Roth IRA, which is still subject to the 10-year rule, but every dollar they withdraw is tax-free.
Yes, you'll pay taxes on the conversions. But you're paying at your rate (potentially 24% or 28%) instead of your kids paying at their rate (35% or 37%). The family keeps significantly more wealth.
Other considerations:
Roth 401(k)s no longer have RMDs (as of 2024): This makes Roth 401(k) contributions even more attractive for high earners who want to avoid RMDs entirely and leave tax-free assets to heirs.
RMD age increased to 73 (and will increase to 75 by 2033): This gives you more years to do strategic Roth conversions before RMDs force your hand, but it also means larger distributions when they start if you don't plan ahead.
Action item: If you have significant retirement accounts and adult children who will inherit them, model what their tax burden will look like under the 10-year rule. Then work with your advisor to determine if accelerating Roth conversions makes sense for your family.
5. Don't Ignore Estate and Gift Tax Planning Just Because the Exemption Is High
The federal estate and gift tax exemption is $13.99 million per person in 2026 ($27.98 million for married couples). For most families, that feels comfortably out of reach.
But here's what many people forget: exemptions can change. And state estate taxes can hit at much lower thresholds.
Why you should care even if you're "under the limit":
Future legislative risk: The Big Beautiful Bill Act kept the current exemption levels, but Congress could change them again. If you have significant wealth, locking in gifting strategies now protects against future reductions.
State estate taxes: South Carolina doesn't have a state estate tax, but if you own property in states like New York, Massachusetts, or Oregon, those states have much lower exemption thresholds ($1-7 million). Your heirs could face state estate taxes even if you're exempt federally.
Wealth trajectory: If you're 50-60 years old with $5-10 million today, your estate could easily grow to $20-30 million over the next 20-30 years. Planning now is far easier than scrambling later.
Gifting strategies that make sense:
- Annual exclusion gifts ($19,000 per recipient in 2025, indexed for inflation)
- 529 superfunding (five years of annual exclusion gifts upfront)
- Grantor Retained Annuity Trusts (GRATs) for transferring appreciating assets
- Irrevocable Life Insurance Trusts (ILITs) to remove life insurance from your taxable estate
Action item: If your net worth exceeds $5 million or is growing significantly, work with an estate planning attorney and financial advisor to stress-test your plan under different exemption scenarios.
6. Charitable Giving: Stop Leaving Tax Benefits on the Table
High-net-worth individuals are often generous. But many give inefficiently from a tax perspective.
The problem with cash donations:
If you donate $50,000 in cash to charity, you get a $50,000 deduction (subject to AGI limitations). But if you're in the 35% bracket, that's only worth $17,500 in tax savings.
The better approach: donate appreciated assets.
If you donate $50,000 of stock that you bought for $10,000, you:
- Get a $50,000 deduction (same as cash)
- Avoid paying capital gains tax on the $40,000 appreciation
- Save an additional $9,520 in federal taxes (23.8% capital gains + NIIT)
Total tax benefit: $27,020 instead of $17,500.
Even better: Qualified Charitable Distributions (QCDs).
If you're 70½ or older, you can donate up to $108,000 directly from your IRA to charity (in 2026). It satisfies your RMD, reduces your taxable income, and doesn't require itemizing.
For high earners worried about IRMAA or NIIT, QCDs are one of the most efficient ways to give.
Donor-Advised Funds (DAFs) for lumpy income years:
If you're selling a business, receiving a large bonus, or exercising stock options, a DAF lets you bunch multiple years of charitable contributions into one high-income year, maximizing your deduction, then distribute to charities over time.
Action item: If you give regularly to charity, meet with your advisor to build a multi-year giving strategy that maximizes tax efficiency.
The Bottom Line: Think in Decades, Not Tax Years
The wealthiest families I work with don't obsess over their annual tax bill. They build strategies that better position taxes over a lifetime and across generations.
That means:
- Balancing traditional and Roth contributions based on lifetime tax projections
- Using low-income years strategically for Roth conversions
- Modeling the full cost of income (IRMAA, NIIT, state taxes)
- Planning for how your heirs will be taxed on inherited retirement accounts
- Building estate and gift strategies before you "need" to
- Giving to charity in the most tax-efficient way possible
Your CPA will file your 2025 return and tell you what you owe. But it's your financial advisor's goal to help you build a plan that reduces your lifetime tax burden and positions your family for long-term success.
If you're preparing your taxes this year and wondering whether you're thinking strategically enough, let's talk.
Fred Shows is a financial advisor based in Greenville, SC, but serving clients across the country, building comprehensive financial plans that integrate tax strategy, investment management, and estate planning.
Ready to build a smarter long-term tax strategy? Contact Fred at frederick.shows@goodlifefa.com or (864) 520-5061 to schedule a conversation.
This information is for educational purposes only and should not be considered investment, tax or legal advice. Tax laws are complex and subject to change. Please consult with a qualified tax professional or CPA before making any tax-related decisions.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.